Co-Ops Closing, Larger Insurance Carriers Consolidating, How is This a Good Thing?

When the Affordable Care Act passed, it was said that the law would create competition and that would help to reduce premiums. At that time, before the law was fully implemented fourteen carriers began to leave the health insurance market due to some of the regulations that were going to be required under the law. Some of the more notable ones were American Community Mutual, Unicare, Guarantee Trust Life, and American Republic. These were all smaller carriers which filled a nice niche in the self employed and individual health market. Once the ACA passed they had to determine if they were going to comply with some of the mandates or get out of the way, they chose the ladder. In 2015, Assurant Health closed its doors after over 100 years in business. 2015 also began the mergers of Aetna and Humana as well as Anthem and Cigna.

The ACA also created 23 Consumer Operated and Oriented Plans or Co-ops. These were designed to create nonprofit, member controlled health plans to compete with the for profit health insurers. To get started they were given $2.4 million in loans and grant. Vermont’s failed before it opened and the Iowa and Nebraska Co-op failed in its first year. Of the 23 Co-ops, only seven remain (three announced they were closing in July). All seven of them lost money in 2015 and may not be around in 2017.

Including the new Co-op’s that started and failed over 30 insurance carriers have left the market or merged with another carrier. The Heritage Foundation did an analysis to review state level insurer participation and compared them in 2015 to both 2014 and 2013 which was the year before the law was fully implemented.

They found that the exchange market is 21.5% less competitive based on the number of insurers participating in all 50 states. In 2014, it was 36% less than 2013. While 2015 saw a few more carriers, it was still less than the pre-ACA market. 2016 witnessed about an 8% decline from 2015. This study considers carriers by state. With the health insurance marketplace, not all carriers participate in every county.

Some of the states were affected more than others. Comparing 2013 to 2015, Alaska shows a 50% decrease in carriers, but it went from four down to two. There are several states like that. Some of the more significant are Florida from 18 carriers down to 10. Virginia from 10 to 6, Kansas from nine down to three. In 2016 Alaska was down to one carrier. Florida had dropped to 7. Virginia had increased to 8.

The Heritage Foundation also looked at this county by county. Of the 3,134 counties in the country, over 1000 had two or fewer carriers on the market place. 89% of US counties had five or less carriers.

What we know from history is less competition never drives pricing down. The insurance market is no different. How many carriers will still be around when the Affordable Care Act open enrollment begins in November is hard to tell, but with the state regulators closing some of the carriers down and the others like United Health Care saying they will not participate in many markets in 2017 the indications are that there will be less in 2017 then there was in 2016.